Department is not bound to give ITC benefit to buyer merely because suppliers were registered at the time of transaction: Supreme Court

The Supreme Court has held that the ministry is not obliged to provide ITC benefits to the buyer merely because the suppliers were registered at the time of the transaction.

The court noted that registration of companies on the day of transaction does not necessarily require the department to grant the assessor the ITC benefit. This is especially true if it is later discovered that the suppliers did not exist and were unable to actually deliver.

The petitioner in question is a manufacturer and marketer of aluminum castings and machine parts. During an investigation of their premises, it was discovered that they claimed to have received supplies from three companies and availed input tax credit (ITC) on these supplies. However, further investigation by the Special Investigation Branch (SIB) revealed that these companies did not exist and were fake.

However, the petitioner claims that they did indeed receive goods, as evidenced by the documents they submitted to the judicial authority. They also claim that the suppliers had a valid GSTIN registration at the time of supply. The petitioner argues that they should not be penalized if the GSTIN registration of the supplying companies is subsequently withdrawn.

Clearly, this case raises important questions about the validity of ITC claims and the responsibility of companies to ensure the authenticity of their suppliers. The petitioner’s argument, while understandable, must be balanced against the need to prevent fraudulent practices in the GST system. Ultimately, it will be up to the court to determine the validity of the petitioner’s claims and determine an appropriate course of action.

During the hearing on the petition, the Additional Chief Standing Counsel raised his opposition. He categorically stated that this was not a case where the petitioner was denied ITC benefit and subsequently burdened with liabilities due to cancellation of suppliers’ registrations. Instead, the petitioner was penalized for falsely representing incoming supplies from non-existent and bogus firms, and for fraudulently claiming ITC without actual incoming supplies.

It is clear that the orders were passed against the petitioner in consideration of his fraudulent acts. Therefore, it is not justified to claim that the petitioner has been unfairly penalized for the cancellation of the registrations of suppliers. It is important to maintain the integrity of the system and ensure that fraudulent activity is not overlooked.

The Supreme Court has dismissed a petition filed by a company challenging the penalty and interest imposed by the company as well as the recall of Input Tax Credit (ITC) on inward supplies of goods by non-existent companies. The court has upheld the order of the GST authority in this regard.

The court emphasized that fraud affects even the most solemn proceedings and the mere fact that the ITC benefit had previously been granted to the taxpayer simply because the companies were then registered would not exclude the authority to take appropriate action. to demand reimbursement of the wrongly received benefit.

In other words, the court has made it clear that the company cannot escape the consequences of its fraudulent activities. This statement reminds us that the law will always catch up with those who try to cheat the system, and that there is no escaping the consequences of such actions. The court’s decision is a victory for justice and the rule of law.

Written by: Suraj Nihal

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